This is a gift, nobody knows if we'll get it next year. Don't let your distressed sellers miss it! Congress has extended the mortgage debt relief act. This is an extension of the original debt relief act enacted in 2007. The mortgage debt relief act exempts the amount of mortgage that was forgiven in a short sale. Prior to this, the amount of shortage was considered taxable income to the seller. An example of this: A seller purchased the home for $ 200,000 and short sold it for $ 120,000. At the end of the year they would have to declare an additional $ 80,000 on their income tax.
The act was designed to reduce the # of bankruptcies and foreclosures. Many in the lending industry are concerned that this extension is short lived, as congress only extended it for 1 year. In 2014, if the act is not extended experts predict an increase in housing related bankruptcies and an increase in the # of foreclosure filings.
Homeowners who are currently in distressed situations should really consider 2013 a year of action rather than sitting on the sides. Interest rates are low and banks want to clear the non-producing loans and start rehabilitating the lending base but if this is the last year of mortgage debt relief then 2014 is a whole new ball game.
With 1 in 7 homeowners in distress, banks cannot afford to let this large population fall away. The need them to bank, to charge, to purchase cars and ultimately purchase new homes.
To learn more please contact Steven Schafer at Balsley Losco Realty Estate – Ph. 609-470-1806.